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May 18th, 2017

Political News

Explosions in Brasilia

Yesterday night, Brazil watched astonished the disclosure of the alleged participation of the President of the Republic, Michel Temer, in a scheme to silence the former president of the Chamber of Deputies, Eduardo Cunha, and Lúcio Funaro, its operator, about irregularities involving allies.

Political News

Last Wednesday night (17), Brazil watched astonished the disclosure of the alleged participation of the President of the Republic, Michel Temer, in a scheme to silence the former president of the Chamber of Deputies, Eduardo Cunha, and Lúcio Funaro, its operator, about irregularities involving allies.

The information was obtained through the plea bargain celebrated by businessman Joesley Batista, one of the owners of JBS, the largest meat processing company in the country, with the Attorney Generals’ Office (PGR, in the Portuguese acronym). According to the disclosed information so far, Temer paid Cunha some sort of “allowance”, in exchange for his silence, and, after Cunha’s arrest, the president paid R$ 5 million, and had agreed to give another R$ 20 million for him to pass a law that would benefit JBS.

There is great expectation concerning the release of the recordings that were already delivered to the PGR, classified until now. According to Joesley, in a conversation recorded with a bug, Temer also nominated Deputy Rodrigo Rocha Loures (PMDB-PR) to resolve a matter of J&F (holding company which controls JBS) on the Administrative Council for Economic Defense (Cade). He pointed out that, after asking President Temer if he could "deal with everything", the former would have responded positively: "Everything."

In addition to mentioning Temer's involvement in the corruption scheme, Joesley also recorded a conversation with Senator Aécio Neves, in which he asks for R$ 2 million to subsidize his defense in the Lava Jato operation. Lava Jato's rapporteur in the Federal Supreme Court (STF), Supreme Court Justice Edson Fachin, has already ruled for the suspension of Senator Aécio Neves, who is also the national president of the Brazilian Social Democracy Party (PSDB), one of the parties with the highest number of seats in the National Congress, and also strategically relevant for the political support of the Temer administration, as well as the suspension of Deputy Rocha Lourdes (PMDB/PR) from the Chamber of Deputies. Regarding the imprisonment of Mr. Neves, the Minister submitted the matter to the STF plenary.

Speculation about the recordings, released late wedsnesday last night, shook Brasilia to the ground. The sessions of the Congress that were taking place at the time of the disclosure immediately ended. Behind the scenes, there were only rumors about the indictment and its impact on the ongoing Social Security Reform in the Chamber of Deputies, and Labor Reform in the Senate.

At the moment, there is no clear way to affirm, with certainty, anything about the resumption of the vote on the reforms. As long as the recordings are not released and the charges actually confirmed, the political arena will be emptied in the House. The sessions that were held yesterday in the Chamber of Deputies and the Senate were closed not only by the discomfort of Temer's allies, but also to avoid fierce incitement by the opposition, further heightening the moods.

If the reforms return to the Legislative Houses next week, the current scenario tends to be a hard blockage of the opposition's votes, especially in the Chamber of Deputies. The labor reform may advance, but everything will depend on what may be coming around next Tuesday, regarding the actual facts. It should be added that there are signs of involvement of thousands of politicians, from president to city councilor. The moment is of legislative paralysis.

In the economic area, there is a tendency of many negative effects on the market, despite the positive news released in the last days concerning the Brazilian growth in the first quarter, after two years. The current economic scenario is mainly that of mistrust, due to the tendency of the delay in the reforms, which may postpone even more the recovery of the economy. Another worry is related to the rising of the dollar, the increasing inflation and the dropping interest rate.

Temer, in an official note, denied any involvement in the scheme. He has declared that he did not make any payments to obtain the silence of former deputy Eduardo Cunha. He did not participate and did not authorize any action in order to avoid a plea bargain or collaboration with the Justice by the ex-parliamentarian. In addition, he also fully supported the police investigation about the denouncement published by the press, aiming at the punishment of those involved in any illegal acts that may be proven.

The political situation of the country is delicate, however, it shows that Brazilian institutions are working (courts and prosecutors) and  mantaining functional independence. The free press is a value and the letter of the law is strong.

After the storm, we all wait for the bonanza, from which more prosperous days will arrive. What is happening in Brazil is part of our history, as a process of maturing our (far too) young democracy. Let us have the courage to move forward and to progress.

Considering the departure of Michel Temer, the Federal Constitution foresees new elections, in which the new Chief of the Executive Power is elected indirectly by the National Congress. And, adding up to the political frenzy in relation to the elections, a proposal to amend the constitution - PEC, presented during the impeachment process of Dilma Rousseff, which amends the constitutional provisions to provide for direct elections in this case, is being processed in the Chamber of Deputies. The result is uncertain, considering that the provisions of the Constitution on indirect elections have not been regulated. This by itself increases the social outcry and tends to inflate the supporters of direct elections.

President Michel Temer made his first statement yesterday (18) after these scandals. After mentioning the improvement of economic indexes and indicators, Temer said that he had actually met with businessman Joesley Batista of JBS. According to the President, however, he had only listened closely to the  businessman, who, in turn, financially assisted the family of former parliamentary Eduardo Cunha. Temer, however, had no knowledge of anything else regarding the subject. At no point would he have allowed expenses to be made to buy Cunha’s silence – so that he would not make any plea bargain. The President stated: "I have not bought anyone's secrecy; I do not fear any plea bargain, I do not need any public office or special forum. (free translation)"

In addition, Temer would never have authorized the misuse of his own name. The investigation by the Federal Supreme Court will be the territory in which the truth will arise. The President demanded a full and quick investigation, so that everything may be clarified to the Brazilian people. If the "clandestine" recordings, in his words, were swift, the investigation should also be. "I will not renounce! I repeat: I will not renounce!".

Temer is, now, trying to keep the allies from the parties which were – once – members of the political base from the government. The scenario, however, is very delicate. Even after all the rummrs about State MInisters leaving the office, the only State one who actually left the government was Roberto Freire, from the Brazilian Culture Ministry, but there may be other defections. The government reforms, which were meant to be voted in both Houses, regarding labor and social security, are currently on hold.

Yesterday, the President suspended his official agenda, and spend the day with Party leaderships, in order to try to control the political situation. There is still the possibility of resignation. In this case, the sucession line is the same as that of an impeachment process, which will be explained below.

The first impeachment request from President Michel Temer was presented by Deputy Alessandro Molon (Rede/RS), but at this moment of uncertainty, it is very unlikely that the President of the Chamber, Rodrigo Maia (PSD/RJ) will accept it, especially since he is a known ally of Temer. Until today (19), at least eight requests for the Impeachment of the President were filed.

If the impeachment requests are accepted, a process is initiated by the Chamber of Deputies, and the Senate deliberates and decides if the request is admissible. If it is regarded as such, the President is asked to step aside, for up to 180 days, while there is an actual decision. However, the President of the lower house, Rodrigo Maia, is a presidential ally, which makes the scenarion even more unertain. Brazilian law states that when a President has to leave the office and there is less than two years to the end of his mandate, and – as is happening now – there is no vice presidente to follow, the National Congress is responsible for choosing the next chief of the Executive Power.

In the case of resignation of President Temer or impeachment, the President of the House of Representatives, Rodrigo Maia, will assume the countrys leadership. In the case of impossibility, the President of the Senate, Eunício Oliveira, is next on the sucession line. The third person on the constitutional list is the President of the Supreme Court, Carmen Lúcia. In both cases, the National Congress has thirty days to make indirect elections.

In São Paulo and Brasília, protesters went to the streets to ask for his resignation. The turmoil caused the Brazilian stock market to have its worst day in over ten years, dropping about 9%, at 61,575 points. The Dollar rose more than 8%, sold at approximately R$ 3,28.